1.

A new non-life insurer writes premiums on annual policies for 15.000 on 15th May. Calculate net earned
premiums.

2.
A new non-life insurer writes premiums on annual policies for 24.000 on 1st August, reinsuring
proportionally 40% of this portfolio. Calculate net earned premiums.

3.
A non-life insurer writes premiums on annual policies for 6.000 on 30th April, reinsuring proportionally 30%
of this portfolio. Knowing that previous years gross premium provisions were 2.500 and the reinsurers
share was 500, calculate net earned premiums.

4.
A non-life insurer reports in 2013 net earned premiums for 1.000. Knowing that the gross premium
provision decreased by 250 and the reinsurers share increased by 150, while ceding premiums for 300,
calculate gross premiums written.

5.
A non-life insurer pays in 2013 claims for 18.000, of which 5.000 are received from reinsurers under non-
proportional treaties. In 2012 gross claims provisions were 6.000 and the reinsurers share was 1.000; in
2013 their value were 7.000 and 900 respectively. Calculate net claims incurred.

6.
A life insurer writes premiums for 300.000 in 2013 and pays benefits for 180.000. Under its non-
proportional reinsurance treaties it ceded premiums for 11.000 but received claims for 6.000. Knowing that
gross mathematical provisions increased by 80.000 and the reinsurers share increased by 2.000, while
gross claims provisions decreased by 10.000 and the reinsurers share decreased by 1.500, calculate net
earned premiums, net incurred claims and all related cashflows.

7.
A portfolio of insurance policies is issued on 1/1/2011 with the following features:
policyholders, individual premium of 100
Benefits: 110 after 2 years if alive or 500 in case of death before maturity
Knowing that:
The average individual premium for the death benefit is 10
Technical provisions are 9.000 for 2011 and 0 for 2012
The company invests 90% of premiums received, earning and cashing 10.000 every year as interests
and dividends, otherwise the investment suffers no changes in fair value
No deaths occur in 2011, but 15 policyholders die and the death benefit is paid in cash in 2012
Provide the effects on balance sheet and income statement for 2011 and 2012.

8.
A life insurance contract with discretionary participation features has the following features:
Premium: 1.000, entirely invested
No insurance risk transfer
Sharing of 85% of realised gains and losses over a ring-fenced fund
During the year, the company realises interests, dividends and other gains for as much as 100, that are
invested again in the same ring-fenced fund (i.e. are not distributed to policyholders directly). At the same
time, the investment backing this contract is available for sale and its fair value increases by 50. Provide the
balance sheet and income statement for this contract assuming that the company makes use of shadow
accounting.
SOLUTIONS

1.
Gross premiums provisions: 15.000 x 4,5 / 12 = 5.625
Net earned premiums: 15.000 5.625 = 9.375

2.
Gross premiums provision: 24.000 x 7 / 12 = 14.000
Premiums ceded: 24.000 x 40% = 9.600
Reinsurers share of premiums provision: 24.000 x 40% x 7 / 12 = 5.600
Net earned premiums: 24.000 9.600 14.000 +5.600 = 6.000

3.
Gross premiums provision: 6.000 x 4 / 12 = 2.000
Premiums ceded: 6.000 x 30% = 1.800
Reinsurers share of premiums provision: 6.000 x 30% x 4 / 12 = 600
Net earned premiums: 6.000 1.800 + (2.500 2.000) + (600 500) = 4.800

4.
Net earned premiums: 1.000 150 250 + 300 = 900

5.
Net claims incurred: -18.000 + 5.000 1.000 100 = -14.100

6.
Net written premiums: 300.000 11.000 = 289.000
Net claims incurred: -180.000 + 6.000 + 10.000 1.500 = -165.500
Change in mathematical provisions: -80.000 + 2.000 = -78.000
Economic result: 289.000 165.500 78.000 = 45.500
Cashflows: 289.000 -180.000 + 6.000 = 115.000

7.
110.000
IRR on liability = 1 = 10,55%
90.000
Value of liability in 2011: 90.000 x (1+10,55%)= 99.495
Value of liability in 2012 (original): 99.495 x (1+10,55%)= 110.000
Value of liability in 2012 (after 15 deaths occur): (1.000-15)x110=108.350

2011 2012
Assets
- Investments 90.000 90.000
- Cash 20.000 22.500
Equity
- Profit/loss for the acc. year 1.505 2.645
- Profit/loss of previous years 0 1.505
Liabilities
- Financial liabilities 99.495 108.350
- Technical provisions 9.000 0
Written premiums 10.000 0
Change in technical provisions (9.000) 9.000
Claims and other benefits incurred 0 (7.500)
Interests and dividends earned 10.000 10.000
Interests incurred on liabilities (9.495) (8.855)
Profit/loss 1.505 2.645
8.
Year 1
Assets
- Cash 15
- Investments available for sale 1.135
Equity
- Profit/loss 15
- Reserve for available for sale assets 7,5
Liabilities
- Financial liabilities 1.127,5
Interests and dividends earned 100
Unrealised gains on investments 42,5
Investment result attributed to policyholders (127,5)
Profit/loss 15